Retailers and consumer advocates say a move by the Reserve Bank (RBA) to overhaul credit card regulations should lead to more competition and lower interest rates.

The RBA says it no longer believes the banking regulator, the Australian Prudential Regulation Authority (APRA), should oversee credit card issuers.

The RBA has held two public consultations over the past year looking at payment card access.

IBISWorld senior analyst Caroline Finch says until now, companies needed to be registered as a bank if they wanted to issue credit cards.

"The issue with the access arrangements currently is that they're quite restrictive. Companies essentially need to be an authorised deposit taking institution, a bank," she told the ABC.

"Banks are under a lot of regulation so this has been a significant barrier to entry, particularly to foreign players, and for anybody who's not already a bank it's quite hard to get yourself registered as a bank."

A number of big Australian retailers already provide credit cards, but the credit risk is underwritten by a third party.

Consumers are likely to get more products, better suited products, and just more choice.

Caroline Finch, IBIS World senior analyst

Ms Finch believes the supermarkets are watching the RBA's move with interest because it could give them significant cost savings.

She says the RBA's move will promote innovation.

"It will also importantly reduce the cost of compliance for existing players, and for consumers this will have two main benefits," Ms Finch said.

"More competition or the threat of more competition is likely to drive innovation in the kind of products that are available and in the use of technology by the companies already in the industry and the companies coming in.

"So consumers are likely to get more products, better suited products, just more choice."

Ms Finch expects foreign players to enter the Australian market once restrictions are eased.

Supermarkets weigh in on credit card changes

In a statement to the ABC, Coles has welcomed the news.

"The growth in Coles insurance and Coles MasterCard demonstrates that there is an appetite among Australian consumers for low cost, convenient and rewarding financial products from new but trusted competitors," the statement said.

"We welcome financial services reforms which will open up competition and encourage innovation because this will lead to more choice, better service and lower costs for consumers."

Woolworths says the RBA's plan is too speculative to comment on at this stage.

A David Jones spokeswoman told the ABC the retailer did not have plans to become a credit provider or change its existing partnerships with its American Express credit card.

The Australian Retailers Association's Russell Zimmerman says he has sought guarantees that both merchants and consumers would be protected under any new arrangements.

"Our belief is they will be," Mr Zimmerman said.

"But what it will do is create competition for both an acquiring market and for an issuing market.

"That means that the banks that issue credit cards, there will be more people that can issue them.

"From the perspective of accepting the transactions via the merchants, there will be more banks and institutions that would accept those payments so it would create competition both for the consumer and for the retailer.

"If you've got more people out there actually issuing credit cards and you've got an option to go to different people for it then obviously there's an opportunity for cards to actually have different amounts of interest and not be dictated to by the major banks."

Consumer group Choice has welcomed the move, but is urging people to stay vigilant if the credit card market heats up with aggressive marketing.

"We know that a lot of the credit cards on the marketplace have very high interest rates indeed and don't offer great value to consumers," Choice spokesman Tom Godfrey said.

"The potential pitfall is that consumers still need to remember that although there might be more credit card providers in the marketplace, it's still a credit facility.

"You still need to assess whether you have the capacity to make repayments on that credit card.

"So just because there are more providers and there is more competition doesn't mean it's a great idea to get a credit card."